W-2 or 1099?
If your employer is deducting income tax from your pay and your income is being reported via a W-2 then you have a better chance of not having your income be a problem when attempting to get approval for a mortgage loan. That is assuming that your income is sufficient to meet the required debt to income ratios.
If your employer is simply writing you a check or even paying you cash and reporting that income on a 1099 form then, today, you may very well have a problem getting approval for your mortgage loan.
To help clarify this let me give you an example that recently happened with one of my applicants. Based on his gross income and debt his debt to income ratio met the guidelines required for approval. He was able to support his income with 1099 forms, a verification of employment, copies of paychecks and bank statements showing his income deposits.
However, his loan was denied after a review of his income tax returns by the underwriter. In this case the underwriter viewed his income as the net after tax write-offs. Therefore, his income became insufficient to meet the debt to income ratio guidelines. His tax returns were completed by a tax accountant and they were all ligitimate tax write-offs.
So, before you think you make enough money to buy a house, understand that you may not. Check with a mortgage loan officer to review your situation before you get too excited and go out looking at new homes.
The criteria to get approval of a mortage loan has changed drastically from just a few years ago.
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